TRU White Paper Canadian-US Competitiveness in Manufacturing

See Postscript below - Canada Position 2016 *The October World Economic Forum Global Competitiveness Report found that Canada's 2004 competitiveness ranking fell to #15 from # 12 in the previous year. [Postscript 2015 below]*. There has been a lot of talk since about Canada's position in the world but in reality it is the comparison with the US that should most trouble Canadians. The United States ranked #1on the Business Competitiveness Index [BCI] as shown in the table:

Canada seriously underperforms the USA in the main index and the strategy-ranking-component. The bottom line analysis is that Canada cannot compete in its overwhelmingly main market and manufacturing in particular is far behind the United States in productivity [chart middle]4. Strategically Canada faces a calamitous long term future if changes are not made.

This situation is seemingly unnoticed by mainstream Canadian economists who repeatedly claim that the economy is healthy and strong. In fact, much of Canada's growth in the last decade was on the back of a severely depressed Canadian currency [see bottom chart - imagine the impact of an extended 15-25% off sale] and falling living standards2,6 masking Canada's precipitous fall in competitiveness with the US.

The Chief Economist of World Economic Forum Mr. Lopez-Claros says, "The United States is technologically pre-eminent among nations in the world, both in terms of research prowess and its ability to commercialize innovations".

Technological capability is a fundamental building block for any modern economy, yet it may be that technology innovation management and entrepreneurship is the weakest link in Canadian overall competitiveness with the United States. Differences between Canada and the US in this area are stark. For example, is it that Canadian innovators look first to the Government for assistance while Americans do so as a last resort? Sadly the Canadian Government, at times directly competing against their own private sector, spends millions to induce companies to partner with them thereby embedding a potentially ruinous mindset among innovators. Government venture capital is damaging to start-ups yet the Canadian Government recently increased venture capital funding "to harvest and commercialize" technology.7

We soundly disagree with other analysts who say "Governments have an Important Leadership Role" 8 or that "Government at all levels has a critical role to play"9 in competitive strategy, for what Canada needs is much less Government not more. Governments absolutely make highly burdensome partners virtually always but especially in the commercialization of technology. Indeed, Governments should not try to give business advice to the private sector and entrepreneurs would best avoid taking such advice.

The Canadian economy should have performed much better than it did in the past and it could perform better in future were Canada more competitive. "Canadian-US competitiveness" is not a usual parameter of the econometric models used by mainstream Canadian economists. It should be. The strategic signs that the Canadian economy is threatened and in trouble are already apparent - manufacturing productivity is at a crisis level. Canadian entrepreneurs and innovators would best recognize this and make the urgent strategic changes that are essential to their and Canada's future.

Related Links:

1. World Economic Forum
2. Centre for the Study of Living Standards
3. Institute for Competitiveness and Prosperity
4. Measuring Canada-US Productivity Gap Rao, Tao and Tang. Industry Canada
5. Harvard University - Institute for Strategy and Competitiveness
6. TD Bank "Are Canadians Slipping Down the Economic ladder"
7. The Honourable David L. Emerson Minister of Industry September 20, 2004 on Canadian Competitiveness
8. Task force on Competitiveness Productivity and economic Progress
9. Roger L. Martin [Rotman] and Michael E. Porter [Harvard] Canadian Competitiveness: Nine Years after the Crossroads

* Postscript 2015 -

http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf

Postscript 2006

Canada's competitive position deteriorated in the September 2006 Ranking for National Business Environment and Strategy.

Dec 2006 Productivity dropped 0.1 percent in the third quarter, compared with 0.3 percent drop the previous quarter. Statistics Canada.

World Economic Forum 2006 report - http://www.weforum.org/pdf/Global_Competitiveness_Reports/Reports/gcr_2006/gcr2006_summary.pdf

Postscript 2007

Canada's competitive position improved one level to 14 overall the September 2007 BCI Ranking.

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